Digital Markets, Competition and Consumers Bill

Lord Lansley Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[Viscount Camrose (Con)]

I certainly do not intend to gloss over any of these issues. I can confirm that the department receives extensive advice on these matters, as have those working on the Bill, not only from competition lawyers but from other stakeholders in the market of all different sizes and types, and indeed from the CMA itself. To turn around the noble Lord’s position, if we make a designation that is designed to last for five years, it is crucial that we take into account existing evidence and what is foreseeable today when determining whether to make that designation. Nobody is being asked to be overly speculative, but it is possible to identify existing trends and available information that can form part of the analysis, and use that to make the determination, particularly as the CMA will then have a duty to explain in detail the rationale behind its decision to designate a firm with SMS, or indeed not to do so.

[Lord Lansley (Con)]

Apologies; I had not intended to intervene on this group, but I am confused and I wonder if my noble friend might be able to help me. We have the word “entrenched”. Obviously, we are talking about “substantial and entrenched”, but “substantial” is not really in debate since, if it has strategic significance, it is likely to be substantial; the issue is with “entrenched”.

A theme that I might develop later on other aspects is to look at our legislation in the context of what has been done by the European Union in its Digital Markets Act. We are doing things differently—and better, I hope—but my point is that the European Union looks at the question of what it describes as an “entrenched and durable position”. That seems to have two aspects to it: the first, “entrenched”, is that it exists and has existed for some time; and the second, “durable”, relates to it being foreseeable that it will continue to exist in future. We have lost the word “durable” and retained “entrenched”, but we are applying it in relation only to what is foreseeable—forward-looking assessment. I am confused about why it is only a forward-looking assessment. The relevant regulation from the European Commission looks back three years to establish whether it is entrenched, and looks forward to see whether it is durable or whether there are foreseeable developments that would give rise to such an entrenched, significant market status. I am looking for both and, at the moment, I cannot see both; I see only the forward-looking part.

[Viscount Camrose (Con)]

Indeed. I am afraid that the use of the word “durable” in this context is new to me. I will very happily take that forward and consider whether it might be a valuable addition to the guidance here. To focus on the outcomes that we want here, we want a reasonably derivable position that the existing entrenched power of the potentially SMS-designated firm is likely to last for the five-year period. We want to ensure that any evidence or analysis supporting that position is presented as part of the report that details why the decision is taken. I will take forward the use of the word “durable”.

[Lord Lansley (Con)]

Would it be fair to say that the contention in this legislation is that the determination that there is a position of strategic significance also satisfies the argument of whether such substantial market power exists? This further assessment is really about whether it is likely to be entrenched and durable over the five-year period, since the designation extends for five years. This is looking forward over those five years. I think it is perhaps not absolutely clear how these two clauses are intended to be considered together for this purpose.

[Viscount Camrose (Con)]

I take note of my noble friend’s point. There may be many areas on which all of us in this Committee end up disagreeing, but one that I doubt we will disagree on is the need for absolute clarity in all these measures. I am very happy to commit to taking that away and seeing whether there is an appropriate form of words that can deliver the clarity that noble Lords are seeking.

--- Later in debate ---

We have heard about the asymmetry potentially within this Bill if we do not get the information sharing right. This would create yet another competitive imbalance in the legislation that is designed to remedy an anti-competitive market. The provisions in this legislation must be available to the smallest player in the market as well as the largest. Amendment 19 would not compromise confidentiality of individual transactions or reveal identifying information about any SMS firms or third parties, because of the requirement that the CMA anonymise and aggregate any data it publishes. The amendment would also allow policymakers, academics, civil society and journalists to monitor the effectiveness of the new regime.

[Lord Lansley (Con)]

My Lords, this is a substantial group of amendments. I have two amendments in the group to which I wish to speak: Amendments 20 and 29. I am grateful to the noble Lord, Lord Clement-Jones, for signing them. I will also discuss a number of other amendments later.

We are dealing with the structure of Clauses 19 and 20. Clause 19 has a set of objectives that conduct requirements are intended to achieve. My noble friend Lord Holmes of Richmond’s Amendment 15 effectively asks us to examine what the purpose of the objectives are. It is quite an interesting question. The objectives are not translated directly into the conduct requirements; the conduct requirements are intended to achieve the objectives. Setting out the broad range of objectives might be regarded as a way of enabling the Competition and Markets Authority to have a broader scope when setting its conduct requirements. Equally, there is a risk that if the scope of the conduct requirements is not specified in Clause 20 and they rely on Clause 19 and the broad-ranging objectives, they will be opened up to challenge as to the meaning of them. We need to be careful.

I come at this from the standpoint that the Digital Markets Act in the European Union does not set objectives in quite that way. It sets not broad objectives but a large number of detailed obligations on what it calls gatekeepers—effectively the same as our designated undertakings for these purposes. We are going down the different route of setting broad objectives and a broader description of conduct requirements. The Competition and Markets Authority will then go on to specify in detail what those conduct requirements look like in relation to any particular designated undertaking to achieve the objectives. That is a better way of doing things.

My two amendments—I will comment on one or two other amendments to the same effect—are asking whether Clause 20 gives the Competition and Markets Authority the necessary scope of powers to achieve what it wants to achieve by setting conduct requirements. Clause 20 is divided into two parts: the things that are positively required to be done by designated undertakings and the things that designated undertakings should be prevented doing. It is important to have those two bits in mind.

I have to confess that I have used the mechanism of looking at our own legislation through the scope of other legislation before, and Amendment 20 to Clause 20 is no different. I looked at the Digital Markets Act and it sets out a lot of detailed obligations. I then asked myself: to what extent do I feel comfortable that what is in Clause 20 gives the CMA the power to do this thing if it wishes to do it?

People are not likely to argue about the fact that data itself is central to this process. When it sets obligations for gatekeepers, Article 5 of the Digital Markets Act starts with a set of obligations related to the ways in which the personal data of users of services can be taken and used. Article 6 talks about the circumstances in which data may be portable and the portability of data between and among gatekeepers and users. Article 6(11) sets out the circumstances under which gatekeepers may or may not access third-party data provided to them as a consequence of users of their undertakings. Article 7 consists entirely of obligations on gatekeepers in relation to the interoperability of number-independent interpersonal communication services.

These are all detailed obligations relating to data access. Whose data can they access and how can they use it? How can they port data between different users and themselves? They are also about the interoperability between and among the users of their services.

I have looked at Clause 20, and the noble Lord, Lord Clement-Jones, was right: there is a provision which restricts interoperability. It is in that bit which prevents undertakings doing things that they should not do. It says that they should not restrict interoperability, but there is no corresponding positive conduct requirement which says that they should be promoting interoperability. This is where the noble Lord and I are coming from, in relation to our Amendments 20 and 21, if I remember correctly.

The point is to secure data access, interoperability and data portability. My amendment is designed to put into that first, positive set of conduct requirements that those should all be things where the CMA has the ability to make what are, effectively, positive conduct requirements upon undertakings to ensure that they enable the market to function more competitively and more efficiently. That is Amendment 20.

Why do I not rely in Amendment 20 or Amendment 21 on the other reference to data, which is in Clause 20(3)(g)? That provision means that requirements may be

“for the purpose of preventing a designated undertaking from … using data unfairly”.

This is very dangerous. We have reached the point where data is a central issue, yet Clause 20 hardly specifies the various ways in which data should be at the core of these conduct requirements. The only reference that we are really relying on for many of these issues is that it should not be used “unfairly”. That is not enough. I am not taking that out, but let us leave in “using data unfairly” and add to it.

Where we add to it is not least in Amendment 29, which, after saying that they should not use data unfairly, would insert

“or using data that is not publicly available which is generated or provided by users of the relevant digital activity in the context of their use of the relevant digital activity”.

I use that language because it is a shorter version of what is in Article 6.2 of the EU regulations, which says that a gatekeeper should not use

“in competition with business users, any data that is not publicly available that is generated or provided by those business users in the context of their use of the relevant core platform services”.

It seemed to me that there was a particular extension of this question of the unfair use of data, which is where they take data from their platform users and use it for themselves. That is what we are trying to restrict and, broadly speaking, what the Digital Markets Act tries to restrict. These two amendments, from my point of view, are about putting data firmly into the conduct requirements, specifying how data is important and where positive requirements may be put, and being specific about the unfair use of data, when data that other users put on the platform is taken for their own use.

On other amendments, briefly, Amendments 22 and 32 would give the CMA the power to vary the scope of conduct requirements in future, rather than relying on the Secretary of State to do so—but of course with parliamentary approval. There is an argument which says, “At least we have an opportunity to examine any change in the scope of conduct requirements if we leave that in”, so I am afraid I do not support that.

The noble Lord, Lord Clement-Jones, made an interesting set of points about copyright. That is very important and it is quite hard to see where it lies in here, unless it were under trade on fair and reasonable terms. However, it will require the CMA to look and ask, “Do fair and reasonable terms lead us to set conduct requirements for designated undertakings relating to, for example, copyright terms?”. It might perhaps be worth us exploring whether it should.

There are one or two other things. I support Amendment 34, which raises a valuable question about taking account of the impact of conduct requirements before making pro-competitive interventions. Otherwise, I just make the general point that I hope, through Amendments 20 and 29, we might put the importance of data firmly into the structure of conduct requirements for designated undertakings.